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Here’s another tip about a specific debt situation that often affects those who have a false sense of security from owing just a little bit of money to a medical office or other business:

Pay attention to the less significant debt letters and small bill statements you receive. The major problem with ignoring these is that even the smallest debts, debts that may total only a couple of hundred dollars, can balloon into massive amounts of money when you don’t understand the collections process, the accrual of interest, or other factors.

So, how does your small dollar medical bill become a giant drag on your finances? It usually happens when the borrower simply decides not to pay anything and lets the bill lapse into collections. When third party collectors receive this account, they may be able to add certain types of charges. This may include additional fees for filing the debt in a legal office, as well as other fees related to documentation of the existing debt. Any costs that involve trying to shoe-horn the borrower into a local court can also show up on that person’s credit. Then there is the issue of ‘communications costs’ related to overdue bill notices, phone calls and more. While there are federal collection laws, each state also follows its own set of laws.

Avoiding critical communications with the original creditor, the doctor’s office, can get you into a lot of financial trouble. Remember this when small dollar claims for co-pays, deductibles and other expenses come in the mail, and you could be helping yourself out of many hundreds of dollars of additional debt. When it comes to handling various types of debt, and medical bills in particular, staying out of the loop and waiting until the last minute is almost always a poor choice.

(Update yourself on Senate Bill 2149 – Medical Debt Responsibility Act 2012: A bill currently in review to exclude medical debt from consumer reports that has been in collection and has been fully paid or settled.)